Stating the obvious, the world is changing, both in terms of politics and economics. The crises we face today impact how the world will look in the future. There is a movement away from the modern concepts of countries to post-modern views where power is relegated to non-governmental organizations. The centers of power are also very fluid, while the US is the dominant military power and probably will remain so for so time, simply because of its current stockpile of weapons and technology; it's military is dependent on the well-being of the countries economy. Economics dictates policy or at least it should. So how is economics changing the global perspective? This brings us to the BRICS.
BRICS is defined as a set of countries that, through their growing economies, are changing the centers of economic dominance. These are Brazil, Russia, India, China and added sometime later South Africa, B-R-I-C-S. I find that although grouping these countries together is an interesting concept, they are certainly in different leagues and probably make no sense being grouped together. India and China are in a league of their own. Each with over 1 billion people and large land mass, they in no way resemble the other countries. Russia is problematic. Extremely large land mass, a declining population and an economy highly dependent on commodities such as oil and gas, Russia has a multitude of social and economic infrastructure problems it needs to deal with. And South Africa is still evolving, more on that in a later blog. That brings us to Brazil.
I, for whatever reason, am highly optimistic about the rise of Brazil as an economic power. Clearly Brazil is blessed with natural resources. A large land mass and a large diverse population make Brazil a potential for sustained economic growth. But there is another factor that I think adds to Brazil's potential. Economics drives politics and politics drives economics. Both are linked and both play a role in defining success. Along with that is the nature of relationships a country can develop out sided it's own boundaries. For Brazil it is a common language that it shares with several other counties, specifically Portugal, Angola and Mozambique.
Angola and Mozambique are also blessed with natural resources and while Portugal does not have the scale of the other countries, it does provide a gateway into the EU. Just think of a greeter common bond then language, add to that religion. In the English-speaking world, the links between the UK, US, Canada and Australia are very strong. These links invite a strong sense of cooperation. There are other examples of language commonality that I will not dwell on but are obvious.
Brazil being the largest of these economies can become a major power by cultivating relationships with these countries. Not only a common economic zone, but maybe something akin to OPEC where power is shared among them. Plus from an interesting geopolitical perspective, a grouping such as this would be the first in the southern hemisphere.
We are moving quickly into a post-modern world where notions of country and nation and state are changing drastically. Countries rich with potential such as Brazil can take advantage of this changing world and become major players in the world arena.
Tuesday, November 29, 2011
Sunday, November 27, 2011
Some thoughts on the Electrical Grid
The Electrical Grid, simply referred to as the “grid”, is technology developed over the last 100 years, and has been described by the National Academy of Engineering as the greatest engineering achievement of the 20th century, eclipsing even the Internet.
A comparison with the “other” grid (the Internet) is worth considering. It seems that the current popular focus on a national and perhaps even global level is the Internet. There is tremendous hype about new companies (and applications) such as Facebook, LinkedIn and others. And who is not glued to their email on a daily basis? In fact, daily commerce has become highly dependent on the use of the Internet. But on a personal level, if Facebook is inaccessible or we can’t read our email for a day or several days, it may be an annoyance, perhaps even a major annoyance, but it is nothing compared to loss of electrical power.
The failure of proper operation of the electrical grid can impact millions of people. One of the best illustrations, but certainly not the only one, is the infamous August 2003 Northeast blackout that impacted eight US states and two Canadian provinces. The number of people who lost power was upwards of 50 million. And the economic cost of this outage numbered in the billions of dollars.
Therefore, correct operation of the grid is important not only on a personal level but also for modern society to function properly. The grid is indispensible for how we work as a society. But currently the grid is facing severe challenges:
• There is continuing need for more electrical power, yet construction of generation resources and transmission lines is constrained by financial limitations and siting concerns.
• Federal and State regulations require utilities to accommodate higher levels of renewable resources. These levels (up to 40%) are higher than today’s grid can manage.
• The US Department of Energy has mandated that utilities improve their equipment and procedures to prevent occurrence of cascading blackouts like the Northeast Blackouts of 1965 and 2003.
• Utilities must conform to urgent requirements to ensure cyber-security under the Federal “Critical Infrastructure Protection (CIP)” program.
On top of these severe challenges; the utilities are burdened with an aging infrastructure (both human and mechanical) as well as by needing to conform to increasingly environmental regulations. For example, North American electric systems in some cases are based on 40-year-old technology that is reaching obsolescence and needs to be replaced.
In order to meet the challenges noted above, utilities, must modernize their transmission and distribution systems. It seems that utilities across the globe are implementing initiatives to increase the efficiency, safety, and reliability of the electricity transmission and distribution systems. Of course they are hampered by nature and economic policies. Earthquakes can impact the type of energy source, e.g. nuclear vs solar. Increased supply of carbon-based resources can decrease the amount of renewable resources.
But, hopefully, by transforming the current electric grid into an interactive service network based on advanced communication and control systems, the “Smart Grid", we all can benefit by lower energy prices and more efficient supplies.
A comparison with the “other” grid (the Internet) is worth considering. It seems that the current popular focus on a national and perhaps even global level is the Internet. There is tremendous hype about new companies (and applications) such as Facebook, LinkedIn and others. And who is not glued to their email on a daily basis? In fact, daily commerce has become highly dependent on the use of the Internet. But on a personal level, if Facebook is inaccessible or we can’t read our email for a day or several days, it may be an annoyance, perhaps even a major annoyance, but it is nothing compared to loss of electrical power.
The failure of proper operation of the electrical grid can impact millions of people. One of the best illustrations, but certainly not the only one, is the infamous August 2003 Northeast blackout that impacted eight US states and two Canadian provinces. The number of people who lost power was upwards of 50 million. And the economic cost of this outage numbered in the billions of dollars.
Therefore, correct operation of the grid is important not only on a personal level but also for modern society to function properly. The grid is indispensible for how we work as a society. But currently the grid is facing severe challenges:
• There is continuing need for more electrical power, yet construction of generation resources and transmission lines is constrained by financial limitations and siting concerns.
• Federal and State regulations require utilities to accommodate higher levels of renewable resources. These levels (up to 40%) are higher than today’s grid can manage.
• The US Department of Energy has mandated that utilities improve their equipment and procedures to prevent occurrence of cascading blackouts like the Northeast Blackouts of 1965 and 2003.
• Utilities must conform to urgent requirements to ensure cyber-security under the Federal “Critical Infrastructure Protection (CIP)” program.
On top of these severe challenges; the utilities are burdened with an aging infrastructure (both human and mechanical) as well as by needing to conform to increasingly environmental regulations. For example, North American electric systems in some cases are based on 40-year-old technology that is reaching obsolescence and needs to be replaced.
In order to meet the challenges noted above, utilities, must modernize their transmission and distribution systems. It seems that utilities across the globe are implementing initiatives to increase the efficiency, safety, and reliability of the electricity transmission and distribution systems. Of course they are hampered by nature and economic policies. Earthquakes can impact the type of energy source, e.g. nuclear vs solar. Increased supply of carbon-based resources can decrease the amount of renewable resources.
But, hopefully, by transforming the current electric grid into an interactive service network based on advanced communication and control systems, the “Smart Grid", we all can benefit by lower energy prices and more efficient supplies.
Economics of being Productive
One thing that has always puzzled me is the economics of efficiency and productivity. We all learn that increased productivity is good. Keeping things simple, this means that if in a month two persons can produce a car and a month later one person can produce a car then we have increased productivity and our economic well-being has increased. No matter that our unemployment has increased. The assumption perhaps is that the unemployed person can find a new job in a different industry. Good luck.
I would argue that increased productivity can in fact be bad. Maybe at a micro level, meaning from a corporate perspective it can be good, meaning lower labor costs produce more profits. Assuming that we measure goodness as maximizing profits. But on a macro level, meaning the society at large, increased productivity if measured in labor costs can increase unemployment and thus be bad for society. Of course, I am assuming that the large the amount of idle people is not a good thing.
I am not advocating that people be employed doing useless work (although the thought had crossed my mind). Rather, I would change the concept of productivity to include minimizing unemployment. Simply put, this may and probably does conflict with efficiency in production. But it many not conflict with social well-being. Where social well-being is partly defined as minimizing unemployment.
Again, consider a rather simple example. If there are two people working on building a car, then both of them have disposable income to purchase goods and services. If only one person is employed then of course then number of people that contributes to economic activity has gone done. So disposable income has gone down and thus other consumer industries have been impacted.
So why is this important and does it really matter?
In an isolated environment, meaning in a country with limited external trade, then I suppose we could maximize economic activity by limiting efficiency and unemployment. But with globalization and companies with a high degree of trans-national activity, maximizing the economic well-being of any specific country is not a high priority. Maximizing profits is, and that could be at the cost of higher unemployment in one country while employing more people in another country.
So this is a prelude to discussing large trans-national corporations such as GE who have no or very limited sovereign loyalty. In other words they don't care if they create unemployment by moving their labor force around to different countries as long as they maximize their profits. For example, GE moving jobs from the US to other countries certainly contributes to unemployment in the US. But what does it care? As long as it can maintain or increase sales world-wide then increasing unemployment (in the US for example) but increasing profit is a good thing.
OK, so I dealt with productivity and globalization and efficieny. Maybe it was a little disconnected. What I want to do is create/examine policies whereby a country can use a measure of productivity that includes unemployment as a mechanism to limit the impact of globalization on it's economic well-being. In other words, keep the jobs at home.
I would argue that increased productivity can in fact be bad. Maybe at a micro level, meaning from a corporate perspective it can be good, meaning lower labor costs produce more profits. Assuming that we measure goodness as maximizing profits. But on a macro level, meaning the society at large, increased productivity if measured in labor costs can increase unemployment and thus be bad for society. Of course, I am assuming that the large the amount of idle people is not a good thing.
I am not advocating that people be employed doing useless work (although the thought had crossed my mind). Rather, I would change the concept of productivity to include minimizing unemployment. Simply put, this may and probably does conflict with efficiency in production. But it many not conflict with social well-being. Where social well-being is partly defined as minimizing unemployment.
Again, consider a rather simple example. If there are two people working on building a car, then both of them have disposable income to purchase goods and services. If only one person is employed then of course then number of people that contributes to economic activity has gone done. So disposable income has gone down and thus other consumer industries have been impacted.
So why is this important and does it really matter?
In an isolated environment, meaning in a country with limited external trade, then I suppose we could maximize economic activity by limiting efficiency and unemployment. But with globalization and companies with a high degree of trans-national activity, maximizing the economic well-being of any specific country is not a high priority. Maximizing profits is, and that could be at the cost of higher unemployment in one country while employing more people in another country.
So this is a prelude to discussing large trans-national corporations such as GE who have no or very limited sovereign loyalty. In other words they don't care if they create unemployment by moving their labor force around to different countries as long as they maximize their profits. For example, GE moving jobs from the US to other countries certainly contributes to unemployment in the US. But what does it care? As long as it can maintain or increase sales world-wide then increasing unemployment (in the US for example) but increasing profit is a good thing.
OK, so I dealt with productivity and globalization and efficieny. Maybe it was a little disconnected. What I want to do is create/examine policies whereby a country can use a measure of productivity that includes unemployment as a mechanism to limit the impact of globalization on it's economic well-being. In other words, keep the jobs at home.
Friday, November 25, 2011
World War 1, Imperialism, and Current Nation-States
Having just celebrated a holiday rooted in World War 1, it might be interesting to understand the consequences of that conflict. WWI ended on the eleventh month, eleventh day, eleventh hour, thus November 11th.
Given that WW2 is usually more explored and WWI is relegated as some ancient conflict, it is interesting to note how much of today's trouble spots are based on decisions made by Imperial powers post WWI. Libya, Syria, Iraq, Afganistan, all created by the winning side, the then European Imperial powers. In this case mostly Britain and France, but others were involved as well.
So why do the Western powers persistent in maintaining the nation-state charade?
Certainly it was not the case in the former Yugoslavia. There the country was split mostly along ethanic lines. So why not Iraq? Why not Afganistan? Especially in the case of Afganistan, it is a hodgepodge of ethnic groups. In the case of Libya, it was created by Italy from three former Ottoman provinces.
Let the people decide, not unlike the case of the newly formed state of South Sudan.
Given that WW2 is usually more explored and WWI is relegated as some ancient conflict, it is interesting to note how much of today's trouble spots are based on decisions made by Imperial powers post WWI. Libya, Syria, Iraq, Afganistan, all created by the winning side, the then European Imperial powers. In this case mostly Britain and France, but others were involved as well.
So why do the Western powers persistent in maintaining the nation-state charade?
Certainly it was not the case in the former Yugoslavia. There the country was split mostly along ethanic lines. So why not Iraq? Why not Afganistan? Especially in the case of Afganistan, it is a hodgepodge of ethnic groups. In the case of Libya, it was created by Italy from three former Ottoman provinces.
Let the people decide, not unlike the case of the newly formed state of South Sudan.
Tuesday, November 15, 2011
Is Europe Doomed?
The simple answer is "of course not". Europe still has much going for it, certainly a large population, albeit an aging one. There is still much technology and now-how in many of the European countries. And certainly a stable lifestyle that is still in demand by many immigrants.
As the saying goes, you learn by your mistakes not by your successes. Certainly, the recent mistakes encountered by a collection of nations with different languages and cultures is huge. But I do believe that there is a desire to have a notion of a "collective" Europe. Of course, different nations have different views of that means. Does this mean a common currency, common government, no passport required? Depends on who you ask.
Europe has lots of potential, but that is meaningless unless that potential is applied. The idea of a cooperative union among european counties is wonderful. This certainly is an alternative to the wars that were inflicted on the continent during the last century. The devastation brought on the continent is something that the peolple of Europe desire to avoid.
Europe is a continent that is a polyglot which makes integration highly difficult. It does not share a common language or cultural identity the way China or the US do. Can a linguistically and culturally diverse set of nations come together under a single cohesive union? Can there me a modicum of mutual trust the transcends old rivalries and prejudices? Time will tell.
The financial crises exposes bad economic management, but that is no different from what is happening in the US. If the powers that be in Europe can deal, and not resolve because resolution is probably impossible, then maybe there is hope. If a major crisis is avoided then maybe Europe can move forward towards integration albeit at a much slower, wiser pace.
As the saying goes, you learn by your mistakes not by your successes. Certainly, the recent mistakes encountered by a collection of nations with different languages and cultures is huge. But I do believe that there is a desire to have a notion of a "collective" Europe. Of course, different nations have different views of that means. Does this mean a common currency, common government, no passport required? Depends on who you ask.
Europe has lots of potential, but that is meaningless unless that potential is applied. The idea of a cooperative union among european counties is wonderful. This certainly is an alternative to the wars that were inflicted on the continent during the last century. The devastation brought on the continent is something that the peolple of Europe desire to avoid.
Europe is a continent that is a polyglot which makes integration highly difficult. It does not share a common language or cultural identity the way China or the US do. Can a linguistically and culturally diverse set of nations come together under a single cohesive union? Can there me a modicum of mutual trust the transcends old rivalries and prejudices? Time will tell.
The financial crises exposes bad economic management, but that is no different from what is happening in the US. If the powers that be in Europe can deal, and not resolve because resolution is probably impossible, then maybe there is hope. If a major crisis is avoided then maybe Europe can move forward towards integration albeit at a much slower, wiser pace.
Sunday, November 13, 2011
Teaching new tricks
Past experience is certainly a guide to the future. And as the old cliche goes, "those who don't know history are doomed to repeat it", and so we are at this age where economists are trying to figure out what happened and what new models we should be using to predict the future, at least the economic one.
Over a year ago, I wrote about problems facing Greece. In as much as the problems in Greece are economic, they are also social. We accept conditions as they are as long as they do not impact our day to day activities. Well, the economic infrastructure was bound to collapse. Too much borrowing. And now the economics dictate the behavior of society. I guess the simple moral of the story is live within your means. I wonder if that lesson is lost these days. And is the US doomed to follow Greece.
Over a year ago, I wrote about problems facing Greece. In as much as the problems in Greece are economic, they are also social. We accept conditions as they are as long as they do not impact our day to day activities. Well, the economic infrastructure was bound to collapse. Too much borrowing. And now the economics dictate the behavior of society. I guess the simple moral of the story is live within your means. I wonder if that lesson is lost these days. And is the US doomed to follow Greece.
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